The Pound made gains against the Dollar while weakening versus 14 of the other 16 major currencies this morning after an industry survey showed corporate profit alerts surged last quarter, adding to signs that the U.K. economy is losing momentum.
This week the BoE meets, and there is speculation that they will further their asset purchase program, or quantitative easing, to cap borrowing costs. Despite this, sterling still strengthened roughly 2% versus the dollar this past week as it looks like Greece might come to the table with an acceptable offer to avoid default.
The Dollar declined against the Euro and the Pound yesterday driven by swings in risk sentiment. The tone for the week could well be set by the extent of progress in the talks on Greek debt restructuring. In the US, GDP data for Q4 are up for release. A growth rate of 3.0% is expected, up from 1.8% in Q3. Stronger consumption growth, a boost from net exports, and positive contribution from inventories will lift GDP growth.
The Fed meeting on Wednesday will be the first meeting with Fed interest rate projections, and it will be very interesting to find out when the Fed expects the first interest rate hike, and how much tightening is expected in the following years. The first hike is anticipated to come in the second half of 2013. Other releases this week will be durable goods orders and home sales and prices.
The Euro made gains against the Pound and reached its highest level against the USD in nearly three weeks on hopes that Greece and Eurozone banks could rise above their mountain of debt. Germany and France are pressing for talks between Greece and its private creditors to cut its soaring debt to sustainable levels and said they were committed to seal a new bailout arrangement for Athens by March to avert a default.
Official news sources stated that the several rounds of meetings between Greece and its private creditors are collaborating a deal which would bring a loss of 65-70% to private bondholders of Greek bonds. In addition, European stocks hit their highest close since early August, largely due to the rally in Eurozone banks after France and Germany called for a relaxation of capital required from global banks to prevent a credit crunch. Despite its recent sharp gain in stocks, European banks are facing cautious investors who fear the risks of potential debt write-offs.
Data released 24th January 2012
UK 09.30 PS Net Borrowing (December)
EU 10.00 Industrial Orders (November)
Global 15.00 IMF World Economic Outlook (January Update)
If you have any questions on market movements or want to discuss the best way to manage any exposure to the foreign exchange market please give me a call on the contact numbers provided.
Alternatively if you would like to unsubscribe from receiving this market updates please respond to this email with the word unsubscribe.